“Flipkart & its $300 million” – The news is not unheard by any one of us. The Bangalore based e-commerce company has become a giant, marking the single largest investment in the country till date. As per the recent data, the company has 96 lac registered users currently, up from a mere 2.5 lac users in 2011. A growth rate of 3740% in two and half years is not just significant but awe-inspiring. Looking at the obvious side, it validates the growth of the Indian e-commerce sector and/or the bright future of the company.
But making money is obviously not something that Flipkart has done yet. There was a time when the entire business model was rumoured to be just aimed at being acquired by Amazon. That is becoming increasingly unlikely every passing moment, what with Amazon slowly building its presence organically.
So why did the existing private equity lenders invest as huge an amount as $200 million? The prevalent theory at the moment is that the investors have already sunk in so much money that they really have no other option apart from pumping in cash till either the IPO or an acquisition happens. But let us look at a different angle here. Perhaps the company is looking for something beyond the revenues from the sale of products. Without doubt, Flipkart has accumulated the largest database of Indian consumers ever created. If the recent happenings in the Silicon Valley have taught as anything, it is that the number of users is at least as important as the products you sell. The potential is unlimited – use them to sell other products or use the data to predict trends, related or unrelated to ecommerce. As the company continuously upgrades its product portfolio to include items like electronics, sports and fitness, beauty and personal care, foot wears, watches and many more, this database gets richer. As ridiculous as it may sound, one day Flipkart might be able to sell some products for free simply to make money from the data it is collecting. With all its delays and hiccups, Indian ecommerce is still full of hope – the need is to try fast, pivot rapid and innovate. If that does not happen, no amount of cash dump is going to make you sustainable in this high competition – low predictability ecommerce scene. For now though, everyone is watching this thriller unfold before their eyes!
Article contributed by Prerna Jain. Prerna has done MBA in finance after completing her graduation from Shri Ram College of Commerce (Delhi University). She has served as an academician for more than two years in the field of accounting & finance. She has written some research papers in finance & marketing and served as the editor of a few books.